A week that saw sharp falls in the international financial markets (Milan -3.3%, London -1.5%, Paris -2.2%, Wall Street -2.2%). Operator’s unease is due to the uncertain view of the macroeconomic outlook expressed by the Governor of the Federal Reserve (moderate improvement in the second half of 2011 but no further injection of liquidity to the market) in addition to fears for a possible rescheduling of repayment of the first tranche of Greek debt (voluntary renewal of Greek bonds at maturity with newly issued securities).
The banks reacted decisively with a 4 percentage point fall across the sector. Financial shares were also weak (-3.1%) while industrial and Auto&Parts record –1.7% and –0.6% respectively.
Pirelli closed at €6.66 (-1.6%) with lower trading volumes than the previous month’s average (mean daily volume of trades 2.5mln vs 3.5 mln).
The Societe Generale upgrade to Buy is noteworthy (TP €8 from €7.6): the share was valued 8% higher than Michelin, reflecting the excellent trend in operating performance. In the broker’s view, the positive trend in global demand, and the recovery of truck tyre production in Egypt will ensure that the 2011 guidance on volumes (>6%) will be achieved.
The current consensus Target Price for Pirelli was €8.15, and the recommendation is primarily Buy (91% of brokers that cover the share).
Categories: Peers & Markets